Correlation Between Prudential Financial and Southern
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and Southern at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential Financial and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Southern Co, you can compare the effects of market volatilities on Prudential Financial and Southern and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential Financial with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Southern.
Diversification Opportunities for Prudential Financial and Southern
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Southern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Prudential Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential Financial are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Prudential Financial i.e., Prudential Financial and Southern go up and down completely randomly.
Pair Corralation between Prudential Financial and Southern
Considering the 90-day investment horizon Prudential Financial is expected to generate 1.24 times less return on investment than Southern. But when comparing it to its historical volatility, Prudential Financial is 1.42 times less risky than Southern. It trades about 0.05 of its potential returns per unit of risk. Southern Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,844 in Southern Co on August 24, 2024 and sell it today you would earn a total of 352.00 from holding Southern Co or generate 19.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. Southern Co
Performance |
| Timeline |
| Prudential Financial |
| Southern |
Prudential Financial and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Southern
The main advantage of trading using opposite Prudential Financial and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, Southern can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Southern will offset losses from the drop in Southern's long position.| Prudential Financial vs. ATT Inc ELKS | Prudential Financial vs. ATT Inc | Prudential Financial vs. Southern Co | Prudential Financial vs. Duke Energy Corp |
| Southern vs. Southern Co | Southern vs. Southern Company Series | Southern vs. ATT Inc | Southern vs. Aegon Funding |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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